How Ola, Uber, other cab aggregators are making life easier for auto firms

Cab aggregators like Ola, Uber, Meru, etc, have come as good news for travellers; they may even have spawned a new breed of professionals who would like to become taxi drivers to earn an extra buck.

The top two car manufacturers in the domestic market, Maruti and Hyundai, also benefited from this trend, as Dzire and Xcent are also very popular among cab aggregators.

Cab aggregators like Ola, Uber, Meru, etc, have come as good news for travellers; they may even have spawned a new breed of professionals who would like to become taxi drivers to earn an extra buck. But equally happy is the automobile industry, which is seeing an upsurge in sales of passenger vehicles due to increased demand for cars on hire or rent.

As per rough industry estimates, around 50-75% of the growth in sales in the first six months of the current fiscal came due to sales to taxi owners.

With increasing penetration of Internet and smartphones, cab aggregator firms are now looking at expanding their operations beyond the five metro cities. As a result, their fleet is expected to rise.

Car manufacturers like Maruti Suzuki, Hyundai, Tata Motors and Toyota are the prime beneficiaries of this trend, as cab aggregators prefer models like Dzire, Indica, Xcent and Etios (sedan).

“A key contributor to growth has been purchases by car sharing companies like Ola and Uber. While the exact numbers are not available, we believe that collectively these two companies have added nearly 75,000-1,00,000 vehicles in the past six to nine months, explaining nearly 50-75% of the growth in the car industry,” said an HSBC global research report on the Indian automobile sector.

As per an industry expert working for a consultancy firm, the number of vehicles purchased by cab service providers in the last financial year was approximately around 1 lakh units.

Models that are suitable for cab services continue to sell more compared to the ones suited for personal use. For instance, Tata Motors, which launched Zest (compact sedan) and Bolt (a hatchback) in the last one year, continues to sell more units of Indica than the new models as it is popular among taxi owners.

During the April-October period, volumes of Indica increased by 9.71% y-o-y to 21,714 units, while Zest did not manage to cross the 14,000-unit mark.

Toyota Etios sedan volumes during the first seven months of the current fiscal grew by 31.08% y-o-y to 18,600 units, as it is one of the most popular vehicles amongst cab aggregators. A significant portion of the Etios volumes comes from fleet owners.

The top two car manufacturers in the domestic market, Maruti and Hyundai, also benefited from this trend, as Dzire and Xcent are also very popular among cab aggregators.

“Cars with low cost of maintenance and more fuel efficiency will find more volumes from cab aggregators,” said Abdul Majeed, partner, Price WaterHouse Coopers.

“As retail sales are not picking up, most OEMs are under pressure to sell. They don’t want to miss any opportunity and are thus following a targeted approach for cab aggregators by offering one or two products from their portfolio at lucrative prices,” said Puneet Gupta, associate director, IHS Automotive.